Online finance, e-commerce players at risk in China's '3.15' exposé

The China Central TV (CCTV) 3.15 programme, incongruously labelled as a 'gala', is dedicated to exposing consumer abuses by individual companies or within an industry. Brands highlighted on this programme suffer serious damage to their reputations, often to the point where they are unable to recover their business, according to Daisy Zhu, managing director of MSL China. In 2010, for example, the programme focused on Hewlett-Packard's supposedly substandard PCs and poor customer service. The company lost 5 per cent in market share.

One hidden rule, according to Zhu, is that B2C companies have a greater chance of being exposed, compared with B2B players. Of the 49 companies exposed over the past six years, only six were B2B companies, such as in the building materials and steel industries.

In the past, MNCs have been targeted more than domestic companies, said Zhu, and the more visible the company, the greater the possibility of being targeted. Past subjects of the show have included KFC, McDonald’s, Starbucks, Heinz, Nestle and Coca-Cola, for example.

"We certainly don’t overlook the fact that domestic enterprises, especially state-owned ones,
receive less scrutiny due to their government ties," Zhu said. "However, based on recent cases of corruption and deaths associated with poor-quality products, they may not necessarily be immune in the future."

CCTV will not divulge its editorial plans publicly, but according to Yin Wen, executive director of the 3.15 programme, determining factors include:

1. Whether it is a real concern for consumers;
2. Whether there is an urgent need to address or resolve the problem; and,
3. Whether it is common (affecting not just a few individuals but the wider public).

CCTV makes the final decisions about what to broadcast today (14 March), with the editorial board evaluating and weighing the persuasiveness, influence and consequences of each story.

In recent days, CCTV's social-media accounts on Tencent, Sina Weibo and WeChat have been disclosing hints about personal financial management, food quality and safety, fake cosmetics, home appliances, online dating services and telecommunications fraud.

These are obvious industries that remain top social and political issues in China, but according to PR practitioners Campaign Asia-Pacific approached, online finance and e-commerce should probably brace for impact.

Colleen Cheng, managing director of the corporate marketing practice at Ogilvy Public Relations China, echoed this sentiment.

Hot target 1: Online finance

As China loosens restrictions in the financial sector, the past year has seen a rapid increase in new online-finance products. The most notable is Yu’E Bao, an investment product offered by Alibaba starting in June 2013. At the same time, the more lax regulation has spurred the growth of online fraud. A company called 360 Internet Security counted 64,000 fraudulent websites between Q1 and Q3 2013, up 42 per cent from the same period in 2012. According to MSL, these sites have cheated users by fabricating financial returns, amounting to an average loss of US$5,160 (RMB31,000) per person.

In particular, companies whose services are likely to cause collateral damage to others in the financial-services industry, and those who rely heavily on services such as e-retailers and online payments, should take notice, according to Charles Shen, EVP at Weber Shandwick China.

Hot target 2: E-commerce

Taobao recorded US$4.9 billion (RMB30 billion) in revenue in 21 hours of trading on the 'Double-11 Day' in 2013. Yet, the immensely popular online-shopping holiday unveiled multiple problems including fraudulent product information, delayed deliveries, limited warranties, and refund refusals.

E-commerce brands like Jingdong and Tmall might be at risk, according to Elan Shou, senior VP cum managing director at Ruder Finn China.

No exact formula exists to determine whether or not a brand will be profiled on the CCTV 3.15 programme, but Zhu revealed some warning signs: escalation of customer complaints and calls from CCTV or its subsidiary asking for advertising cooperation.

What can brands do?

“3.15 Consumer Rights Day and TV are just two communication channels for potential brand crises to spread," Cheng said. "Nowadays brands really need to take a more holistic approach to prevent and manage crises on both traditional and social-media platforms. How companies first respond to a crisis will determine its severity and longevity in consumers’ minds.”

Kelvin Chen, associate director of Eastwest PR Beijing, recommended opening up social-listening tools first, as apart from monitoring online conversations and news coverage, they are also primary platforms to respond to crises.

However, any exposes on 3.15 should not considered one-time issues, Shou added. "Always go back to the fundamentals and review business risks related to consumer rights—and attitude comes first."

"Do not panic and do not hide anything," commented Miranda Cai, senior vice president and partner, general manager of FleishmanHillard China. "Please be honest and admit the mistake if it is really the company's fault. The more important thing is about how you are going to make it right."